Preparing a Sustainability Report: Content, Requirements, and Process for 2026
A sustainability report provides transparency into how a company manages its environmental, social, and corporate responsibilities. It highlights key impacts, risks, and opportunities, as well as goals, measures, and key performance indicators. This guide outlines the reporting requirements as of September 2026 and explains how companies can establish a robust reporting process.
What is a sustainability report?
A sustainability report is a structured presentation of a company’s sustainability-related strategy, management, and performance. It provides information on how the company’s business activities affect people and the environment, and on the financial risks and opportunities that sustainability issues present for the company.
Typical topics include:
- Business Model and Sustainability Strategy
- Responsibilities and Control Processes
- Significant Impacts, Risks, and Opportunities
- Goals, Actions, and Progress
- Key Figures on the Environment, Employees, and Corporate Governance
- Information on the Value Chain
The terms “sustainability report,” “sustainability reporting,” and “ESG report” are often used interchangeably in everyday language. Legally, however, the key factor is the framework within which a company reports. For companies within the scope of the Corporate Sustainability Reporting Directive (CSRD), the sustainability statement—based on the European regulatory model—is an integral part of the management report and follows the European Sustainability Reporting Standards (ESRS). Companies outside this scope may report on a voluntary basis, for example, in accordance with the European Commission’s VSME recommendation.
Who is required to prepare a sustainability report in 2026?
At the EU level, Directive (EU) 2026/470 has significantly narrowed the future scope of the CSRD. In general, the directive applies to companies and groups with more than 1,000 employees and net revenue exceeding 450 million euros. Special requirements and thresholds apply to companies from non-EU countries, as well as their EU subsidiaries and branches. The amending directive entered into force on March 18, 2026, and must be transposed into national law by March 19, 2027.
These EU thresholds are not yet equivalent to the currently applicable German scope of application. Under Section 289b of the German Commercial Code (HGB), corporations in particular are currently required to supplement their management reports with a non-financial statement if they are both large within the meaning of Section 267(3), first sentence, of the HGB and capital market-oriented, and employ more than 500 employees on an annual average. Supplementary provisions apply to credit institutions, insurance companies, and consolidated financial reporting.
A separate non-financial report may either be disclosed together with the management report pursuant to Section 325 of the German Commercial Code (HGB) or published on the company’s website no later than four months after the financial statement date. If published on the website, the management report must include a reference to it, specifying the web address; the report must remain accessible there for at least ten years. The German Bundestag documents the legislative process as well as the public hearing held on April 13, 2026. The Council of the European Union explains the future EU scope and the transitional exemptions.
A case-by-case technical or legal review remains necessary. The EU thresholds alone do not currently determine whether a company in Germany is subject to reporting requirements, nor do they specify the fiscal year in which a new requirement takes effect.
Why Voluntary Sustainability Reports Remain Relevant for SMEs
Even companies that are not legally required to report often need structured sustainability data. Business partners, financial institutions, insurance companies, or public sector clients may request information on energy consumption, emissions, employees, or supply chains.
For voluntary reporting, smaller companies can already follow the guidance set out in Recommendation (EU) 2025/1710 on the Voluntary Sustainability Reporting Standard for SMEs (VSME). This should be distinguished from the delegated act on the voluntary standard, which the European Commission adopted on July 3, 2026. As of September 2026, this delegated act has not yet been published in the Official Journal of the European Union and is therefore not yet in force.
Directive (EU) 2026/470 also provides for a so-called “value chain cap.” It is intended to limit the sustainability information that reporting companies may require from companies with up to 1,000 employees in their value chain. As of September 2026, the delegated act specifying the details of the voluntary standard had not yet been published in the Official Journal of the European Union and was therefore not yet in force. For the directive to apply in Germany, national implementation is also required. According to the adopted delegated act, the limitation is to apply to fiscal years beginning on or after January 1, 2027. Until then, the VSME provides practical guidance for information requests; however, this does not establish a legally enforceable right to generally reject requests that go beyond these limits. Furthermore, the limitation applies only to information requirements for sustainability reporting under the relevant accounting regulations. Other statutory or contractual disclosure obligations are not automatically excluded as a result.
The German Sustainability Code (DNK) helps companies prepare a VSME report using a digital platform. The DNK guide to getting started with VSME reporting breaks down the process into defining roles, reviewing data points, collecting data, and finalizing the report.
A voluntary report is useful if it meets a specific need for information. Companies should therefore first determine what data is actually needed and how it can be reused internally. A report created merely for the sake of reporting generates effort but offers little value for management purposes.
What content should be included in a sustainability report?
A robust sustainability report combines qualitative analysis with verifiable data. It describes not only goals, but also the current situation, actions taken, responsibilities, methods, and progress.
Business Model and Strategy
The report should explain how sustainability issues affect the business model and corporate strategy. This includes dependencies on resources, key stakeholders, and the extent to which the strategy is resilient to sustainability-related risks.
Corporate management
Readers must be able to identify who is responsible for and oversees sustainability issues. Among other things, the roles of management and the board of directors, internal responsibilities, guidelines, and integration into decision-making and risk management processes are relevant.
Impacts, Risks, and Opportunities
Companies should explain the positive and negative impacts their business activities have on people and the environment. Equally important is the financial perspective: Which sustainability issues can affect revenue, costs, assets, financing, or business continuity?
Goals, Measures, and Key Performance Indicators
Goals become verifiable only when the base year, time period, measurement method, and progress are transparent. Actions should be linked to responsibilities and resources. Key performance indicators require consistent definitions and reliable data sources.
Value Chain
Many significant impacts arise not only within a company’s own operations, but also among suppliers, distribution partners, or through the use of products and services. The report should therefore clearly indicate which parts of the value chain were taken into account, where data gaps exist, and what assumptions were used.
Dual Materiality: Which Topics Should Be Included in the Report?
Dual materiality examines a sustainability issue from two perspectives:
- Materiality, also known as the “inside-out” perspective: How does the company impact people and the environment?
- Financial Materiality, Including the Outside-In Perspective: How does a sustainability issue affect the company's financial position and performance?
An issue may be significant from one or both perspectives. The assessment should be based on a documented methodology, reliable information, and clear decision-making criteria. Stakeholder dialogues can provide important insights, but they do not replace the technical assessment.
A more detailed methodological discussion should not be linked until the corresponding CLS article on materiality analysis has been updated to reflect the same legal and ESRS standards.
The United Nations’ Sustainable Development Goals (SDGs) can serve as a helpful supplement to strategic planning. However, they do not replace either the materiality analysis or a binding reporting standard.
A Comparison of CSRD, ESRS, VSME, DNK, GRI, and ISSB
The various frameworks serve different purposes. Therefore, they are not interchangeable.
On July 3, 2026, the European Commission adopted revised ESRS. According to the Commission, the number of mandatory data points will decrease by more than 60 percent, and the total number of data points by more than 70 percent. As of September 2026, the revised standards had not yet been published in the Official Journal of the European Union and were therefore not yet legally effective. According to the adopted legislative act, they are generally to apply to fiscal years beginning on or after January 1, 2027. The legislative act provides for optional and transitional provisions for the 2026 fiscal year. Until the legislation enters into force, Delegated Regulation (EU) 2023/2772, as amended, shall apply, in particular taking into account Delegated Regulation (EU) 2025/1416. The European Commission provides up-to-date information on the delegated CSRD acts.
How to Create a Sustainability Report in Seven Steps
A good report isn't created only during the writing process. Its quality depends above all on clear responsibilities, consistent data, and documented decisions.
1. Clarify the purpose and scope of the report
First, it is necessary to determine whether reporting is required by law or is voluntary. Next, the reporting period, the companies included, the target audiences, and the standard used are defined. This decision prevents teams from collecting data that is not required for the chosen reporting method.
2. Define Responsibilities
The project management team coordinates the process but cannot provide the content on its own. Dedicated points of contact are needed from areas such as sustainability management, finance, controlling, human resources, procurement, compliance, risk management, and communications. For each data point, responsibility, approval, and representation should be clearly defined.
3. Identify requirements and existing data
A data map shows what information is already available, in which systems it is stored, and who is responsible for it. Typical sources include financial and HR systems, energy bills, environmental management data, fleet data, occupational safety information, supplier information, and risk reports.
For each key figure, the definition, unit, reporting scope, source, and calculation method should be documented. This ensures comparability across reporting years.
4. Identify Key Topics
Companies required to report in accordance with the applicable CSRD and ESRS guidelines must conduct a dual materiality analysis in accordance with the applicable requirements. Which version of the ESRS to apply depends on the fiscal year, the scope of application, and the transition provisions. Companies that report on a voluntary basis may determine the scope of their topics on a proportional basis. It is crucial to provide a clear rationale for the selection and to document any changes from the previous year.
5. Collect Data and Set Up Controls
Now, missing data is being collected, consolidated, and verified. Plausibility checks, the dual-control principle, clear calculation rules, and documented approvals help reduce errors. Estimates and data gaps should be clearly marked.
6. Write the report and coordinate internally
The text organizes the data and links strategy, actions, and results. Statements should be specific and verifiable. For example, instead of saying, “We are continuously reducing emissions,” the text should specify which emissions are being referred to, which base year is used, what measures have been implemented, and how the metric has changed over time.
Before approval, the business units, the legal department, Controlling, and Communications review the report from their respective perspectives. Statements in the sustainability report, on the website, in the annual report, and in other publications should be consistent.
7. Plan for Testing, Publication, and Further Development
The CSRD provides for an external audit of sustainability reporting with limited assurance at the European level. How this requirement will be specifically implemented in Germany and from which fiscal year it will take effect depends on the pending implementing legislation. Under the currently applicable Section 317 of the German Commercial Code (HGB), the auditor generally verifies whether the non-financial statement or the separate report has been submitted. On this basis, there is not yet a general requirement to audit the content of the CSRD report.
Even a voluntary report benefits from internal quality assurance or an external plausibility check. Once the report is published, the next reporting period begins: questions, data gaps, and process issues provide starting points for further development.
Sample Structure for a Sustainability Report
A possible outline includes:
- Brief Profile, Reporting Period, and Reporting Scope
- Business Model and Sustainability Strategy
- Corporate Governance and Responsibilities
- Method for Identifying Key Topics
- Significant Impacts, Risks, and Opportunities
- Goals, Measures, and Key Performance Indicators Related to the Environment, Social Issues, and Corporate Governance
- Information on the Value Chain
- Methods, Assumptions, and Data Gaps
- Audit Note or Quality Assurance Note
The structure must be consistent with the selected standard. It is not a substitute for the applicable ESRS or the VSME recommendation.
Common Mistakes in Sustainability Reporting
- Unclear Scope: Companies, locations, or parts of the value chain are included without explaining the reporting boundary.
- Non-comparable metrics: Definitions, units, or calculation methods change without this being made transparent.
- Targets without a baseline: A target does not specify a baseline value, a reference year, or a time period.
- Unsubstantiated claims of effectiveness: The report contains positive statements without any data, methodology, or verifiable measures.
- Coordination comes too late: Academic departments or the reviewing body are not involved until after the report has already been written.
- Reporting and management remain separate: Data is collected solely for publication and is not used to inform decisions or improvement measures.
Establishing Sustainability Reporting as a Reliable Process
A sustainability report is more than just an editorial document. It brings together strategic decisions, expert assessments, and data from many areas of the company. Whether required under the CSRD or prepared voluntarily in accordance with VSME, a clear scope, well-defined responsibilities, and reliable data form the foundation.
Companies don't have to start with a perfect process. What matters most is clearly categorizing requirements, identifying data gaps, and refining reporting year after year. This results in a report that not only creates transparency but also supports internal management.
FAQ
What is a sustainability report?
A sustainability report provides a structured overview of how a company manages its environmental, social, and corporate responsibilities. It describes key impacts, risks, and opportunities, as well as the associated goals, measures, and key performance indicators.
Who is required to prepare a sustainability report in 2026?
Under current German law, this primarily affects corporations that are both large and capital-market-oriented and that employ more than 500 workers on an annual average. The future EU thresholds for companies and corporate groups—more than 1,000 employees and more than 450 million euros in net revenue—have yet to be transposed into German law. Therefore, each company must review its specific legal status, fiscal year, and corporate structure.
What should be included in a sustainability report?
Typical content includes the business model and strategy, corporate governance, significant impacts, risks and opportunities, objectives, actions, key performance indicators, and information on the value chain. The specific scope depends on the applicable reporting standard.
What is the difference between CSRD and ESRS?
The CSRD is the EU’s legal framework for sustainability reporting. The ESRS specify what information companies subject to the CSRD must report and the principles according to which they must present that information.
Can SMEs voluntarily prepare a sustainability report?
Yes. Companies outside the statutory scope of application may voluntarily follow Recommendation (EU) 2025/1710 on the VSME. It provides a proportionate framework for collecting sustainability data in a structured manner and responding to inquiries from business partners or financial institutions. The delegated act on the voluntary standard, adopted in 2026, had not yet entered into force as of September 16, 2026.
Does a sustainability report have to be audited?
The CSRD provides for an external audit with limited assurance at the European level. The specific German requirement depends on the pending implementing legislation. Under the currently applicable Section 317 of the German Commercial Code (HGB), the audit generally verifies whether the non-financial statement or separate report has been submitted; voluntary reports are not automatically subject to a statutory audit requirement.
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